Part of ongoing series examining the least-transparent energy business in the country: propane gas.

Like most residential propane gas customers, the town of Somers assumed its supply company was charging a fair price, and for the past 20 years or so, the town simply wrote out checks for whatever the bills were.

But with the economy in a tailspin and budgets needing to be slashed, the town's volunteer fire chief decided this winter to check if the town could do better, considering it uses as much as 8,000 gallons of propane a year.

Fire Chief Edward F. Pagani Jr. and the rest of the town's officials were stunned by what he discovered: By shopping around, the town was able to cut its propane bill by more than half.

Now, before you start berating Pagani or other town officials for not taking action sooner, you need to understand the propane game.

Unlike heating oil dealers, propane companies don't advertise their prices, nor will most even tell you what their price is if you call them. They don't have to. Why? Because they have their customers over a barrel.

The propane industry -- in the guise of worrying about propane customers' safety -- convinced the legislature and fire marshals in Connecticut, and every other state that I know of, that only the OWNER of a propane tank can fill it. For the consumer, that means that unless you own your own tank, you must have it filled by the company you rent it from.

Step two on the part of the industry was to do whatever it could to discourage homeowners and businesses from owning their own tanks.

They talked builders into putting rented tanks into new developments.
It was a no-brainer for the developer because he paid zip for the tank.

They sweet-talked new propane customers by offering low introductory
prices and lulled them into accepting long-term, vague contracts with
costly exit fees.

And they succeeded. Only 4 percent of the estimated 300,000 propane customers in Connecticut own their tanks.

So the town of Somers could not simply call up other propane companies
to find out whether they could do better than Superior Energy of
Vernon, which was charging them $3.49 a gallon. As long as Superior
owned the several above- and below-ground tanks used by the school
system and town buildings, only Superior Energy could provide the
service.

One of the competitors that Pagani first contacted was High Grade Gas
Service of Enfield. Pagani said people at High Grade explained that as
long as the town did not own its own tanks that it would be held
hostage to its dealer. The company had a solution.

High Grade came in with a low initial bid of $1.49 a gallon and agreed
to sell the town some reconditioned tanks by adding a $1 charge to each
gallon until the tanks were paid off.

Even for $2.49 a gallon, Somers will save thousands of dollars a year
and is on the way to owning its tanks. Once it does, it can go out to
bid each year to get the best price.

Somers officials, needless to say, are not too pleased with Superior
Energy. One reason is that as soon as Superior management found out
that Somers was looking around, it started making offers like a
desperate merchant on the day after Christmas.

"When I confronted Superior they immediately dropped the price to $2.49
a gallon. Then they dropped it to $1.29 a gallon," Pagani said.

Pagani, who understands how gas works, being a full-time employee of
Connecticut Natural Gas, said he is not buying the propane industry's
claims that it needs to own the tanks to protect consumers.

"There is absolutely no safety issue for the consumer," Pagani said,
because whoever fills the tanks is licensed and will be just as careful
whether it's company- or customer-owned.

The town's liability insurance did not go up because it now owns its
tanks, he noted, knocking down another myth the industry came up with
to scare customers into renting tanks.

Steven Green, spokesman for Superior Energy, declined to comment about
the Somers issue, saying: "It is our policy not to discuss proprietary
customer information with anyone other than our customer." His complete statement.

I am not a big fan of more government regulation. But I am convinced
the legislature needs to protect consumers who depend on propane gas
from being ripped off. When energy prices were stable and low, there
wasn't such a huge difference between prices charged for customers who
own their own tanks and those who didn't.

Over the past two years, too many propane companies have shown they
will use price fluctuation as a way to dramatically increase their
profit margins believing that its customers won't know about it, and if
they do, they can't do anything about it.

The state legislature has an opportunity this year to level the playing
field between consumers and propane companies. Several bills are being
discussed, including one that is jointly proposed by the Propane Gas
Association and Attorney General Richard Blumenthal. The association's
statement about the proposal..

It's not a bad bill, but it doesn't go far enough. What the legislature
needs to do is to take the gun out of the hands of the propane
companies and allow any licensed dealer to fill anyone's propane tank.
Then you will see real competition and fair pricing.

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5 Comments

Thank you for your series on propane customers and the practices of this industry. We bought a home seven years ago and was told it was heated by gas. We were surprised to learn it was propane when we moved in. Knowing nothing about this form of heat we later learned the tank was owned by the gas company and we were contracted to use them. I have called several other companies and most have given me prices per gallon over the phone, however they all tell me about the risks of owning my own tank, including needed yearly inspections, insurance increases, maintaince issues, etc. After reading all your columns I am better informed and educated on this topic as well as angry that this is allowed to go on. I am currently shopping to purchase a new tank, and hopefully I will be able to shop for the best price in the future. Thank you for all you have done, and please let us all know what we can do to help push legislation against this practice.

Dear Mr Gombossy,
I have read the bill and was struck by The Propane Dealers Association and AG Blumenthal. It is disgustingly weak, no surprise, it was written by their lobbyists and lawyers to protect them. There is nothing in the bill that protects consumers from these predators who cannot quote you a price that makes any sense. They run their businesses by panicked owners who question your intentions for daring to ask about buying the tank. If the bill wants to be transparent, it should show a ten year amortization schedule for a homeowner to buy the tank. I have never seen such panic as I experienced yesterday when I dared to buy my tank. I am tired of the lack of transparency in this business and am going to contact my representative and senator and let them know of my displeasure. It appears that Mr. Blumenthal has not experienced the thrill of having to purchase propane.

Francis, I agree with you that its a weak bill. It does does some good things though and my understanding is that the AG will come back with some strong amendments. This is the year where propane customers - I am not one of them, we have natural gas - have an opportunity to make drastic changes to the law. If we don't do it now, it won't get done next year. Take care
George "the Dog"

Thank you for helping be that eyes and ears for consumers of the propane industry. My husband and I purchased a new home in November 2008, and chose not to sign the part of the contract in which Superior Energy was the propane provider. We are trying to deal with this company and are having a difficult time. This company is terrible. They have tried to bully us and push us into a corner, but we are holding firm. We are looking to purchase the tank from them for an amount that we think is resonable. The contract that they have giving us and many others in our area (new development) is over $7,000 plus $30 a month to lease the tank. We were also told that we have to purchase a certain amount of fuel every year. This is the kind of company that Superior Energy of Vernon. It is like an abberation, and we should continue to fight until legistation passes to regulate this industry and stop companies like Superior in its tracks.

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